Financial Fairness. A health system’s financial
fairness (FF) ismeasured by determining a
household’s contribution to health expenditure
as a percentage of household income
(beyond subsistence), then looking at the dispersion
of this percentage over all households.
The wider the dispersion in the percentage of
household income spent on health care, the
worse a nation will perform on the FF factor
and the overall index (other things being
equal).
In the aggregate, poor people spend a larger
percentage of income on health care than
do the rich.4 Insofar as health care is regarded
as a necessity, people can be expected to spend
a decreasing fractionof their income onhealth
care as their income increases. The same
would be true of food, except that the rich
tend to buy higher-quality food.
The FF factor is not an objective measure
of health attainment, but rather reflects a
value judgment that rich people should pay
more for health care, even if they consume
the same amount. This is a value judgment
not applied to most other goods, even those
regarded as necessities such as food and
housing.Most people understand and accept
that the poor will tend to spend a larger percentage
of their income on these items.
More importantly, the FF factor, which
accounts for one-fourth of each nation’s OA
score, necessarily makes countries that rely on
market incentives look inferior. The FF measure
rewards nations that finance health care
according to ability to pay, rather than according
to actual consumption or willingness to
pay. In most countries, a household’s tax burden
is proportional to income, or progressive
(i.e., taxes consume an increasing share of
income as income rises). Thus, a nation’s FF
score rises when the government shoulders
more of the health spending burden, because
more of the nation’s medical expenditures are
financed according to ability to pay. In the
extreme, if the government pays for all health
care, then the distribution of the health-spending
burden is exactly the same as the distribution
of the tax burden. To use the existing
WHO rankings to justify more government
involvement in health care—such as via a single-
payer health care system—is therefore to
engage in circular reasoning because the rankings
are designed in amanner that favors greater
government involvement. If the WHO rankings
are to be used to determine whethermore
government involvement in health care promotes
better health outcomes, the FF factor
should be excluded.
The ostensible reason for including FF in
the health care performance index is to consider
the possibility of people landing in dire
financial straits because of their health needs.
It is debatable whether the potential for destitution
deserves inclusion in a strictmeasure of
health performance per se. But even if it does,
the FF factor does not actually measure exposure
to risk of impoverishment. FF is calculated
by (1) finding each household’s contribution
to health expenditure as a percentage of
household income (beyond subsistence), (2)
cubing the difference between that percentage
and the corresponding percentage for the
average household, and (3) taking the sum of
all such cubed differences.5 Consequently, the
FF factor penalizes a country for each household
that spends a larger-than-average percentage
of its income on health care. But it
also penalizes a country for each household
that spends a smaller-than-average percentage
of its income on health care.
Putmore simply, the FF penalizes a country
because some households are especially
likely to become impoverished from health
costs—but it also penalizes a country because
some households are especially unlikely to
become impoverished from health costs.